Nigerian Banks - How Striking Are the Dividend Yields Now?

What started as a toast to investors turned gloomy by the end of May. Nigerian banks tanked hard starting in February on worries about rising interest rates in the developed markets, domestic political play, and concerns on FX stability. For context, Nigerian banks gained 26% in January alone and later shed 20% between February and May.

With market sentiment remaining subdued, it could be time to look at high dividend yielding banks. In trying to ascertain how attractive Nigerian banks are from a dividend yield perspective, we have assumed two scenarios (a) dividend yield using 2017 dividend payment (b) dividend yield using our 2018e dividend payment.

Based on our analysis, we see dividend yields of some banks in our coverage reaching over 10%. Specifically, across the tier 1 banks, we like Zenith and UBA, while Fidelity Bank remains our most preferred Tier 2 pick. Moreover, our positive valuation on these banks supports its alluring case in the near term.